New York attorney general details post-hurricane price gouging investigation as consumer complaints rise

by jmaloni

Press release

Mon, Nov 5th 2012 01:00 pm

Schneiderman warns against price inflation of necessary
goods and services during Hurricane Sandy

State law prohibits excessive increases in costs of essential
goods like food, water, gas, generators, batteries and flashlights

A.G. also issues tips to avoid scams for consumers and
businesses recovering from the storm

Attorney General Eric T.
Schneiderman has announced an investigation into post-Hurricane Sandy price
gouging after receiving hundreds of complaints from consumers across the state
of New York.

Before the storm made land fall,
the attorney general issued an open letter to vendors in areas forecast to be
affected by Hurricane Sandy to warn against price gouging, the inflation of the
price of necessary goods and services. General business law prohibits such
increases in costs of essential items such as food, water, gas, generators,
batteries and flashlights, and services including transportation, during
natural disasters or other events that disrupt the market.

Schneiderman also issued a guide
to New Yorkers recovering and rebuilding after Hurricane Sandy, including tips
on how to avoid scams as they restore and rebuild their homes and businesses.

"Our office has zero
tolerance for price gouging," Schneiderman said. "We are actively
investigating hundreds of complaints we've received from consumers of
businesses preying on victims of Hurricane Sandy, and will do everything we can
to stop unscrupulous individuals from taking advantage of New Yorkers trying to
rebuild their lives."

New York State's Price Gouging Law
(General Business Law § 396-r) prohibits merchants from taking unfair advantage
of consumers by selling goods or services for an "unconscionably excessive
price" during an "abnormal disruption of the market." The price
gouging law covers New York state vendors, retailers and suppliers, including
but not limited to supermarkets, gas stations, hardware stores, bodegas, delis,
and taxi and livery cab drivers.

Although the office cannot comment
on the specifics of ongoing or potential investigations, Schneiderman reported
receiving hundreds of complaints from consumers from New York City, the Hudson
Valley and Long Island. While the largest number of complaints related to
increased gasoline prices, consumers contacted the attorney general to report
possible gouging for emergency supplies such as generators, hotels raising
rates due to "high demand," as well as increased prices for food and
water. The attorney general noted that these complaints might not meet the
threshold for coverage under New York's gouging statute, but encouraged
consumers to contact his office to report anything that appears
suspicious.

"Our office is taking every
complaint seriously. Staff from regional offices across the state are triaging
and acting on consumer complaints as they come in. We have contacted the
targets as part of a preliminary inquiry and vendors are now on notice. While
most retailers understand that customers are also neighbors, and would never
think of taking advantage of New Yorkers during such disruptive times,
emergency circumstances always require an extra sense of
vigilance," Schneiderman said.

He urged New Yorkers to call his
office at 1-800-771-7755 or log on to his office's website to make a
complaint.

New York's price gouging law takes
effect only upon the occurrence of triggering events that cause an "abnormal
disruption of the market." An "abnormal disruption of the
market" is defined as "any change in the market, whether actual or
imminently threatened," that results from triggering events such as
"weather events, power failures, strikes, civil disorder, war, military
action, national or local emergency, or other causes." During an abnormal
disruption of the market like Hurricane Sandy, all parties within the chain of
distribution for any essential consumer goods or services are prohibited from charging
unconscionably excessive prices. "Consumer goods" are defined by the statute as
"those used, bought or rendered primarily for personal, family or household
purposes." For example, gasoline, which is vital to the health, safety and
welfare of consumers, is a "consumer good" under the terms of the
statute. Therefore, retailers may not charge unconscionably excessive prices
for gasoline during an abnormal disruption of the market.

New York's price gouging law does
not specifically define what constitutes an "unconscionably excessive
price." However, the statute provides that a price may be
"unconscionably excessive" if: the amount charged represents a gross
disparity between the price of the goods or services which were the subject of
the transaction and their value measured by the price at which such consumer
goods or services were sold or offered for sale by the defendant in the usual
course of business immediately prior to the onset of the abnormal disruption of
the market.

In other words, a
"before-and-after" price analysis can be used as evidence of price
gouging. Evidence that a price is unconscionably excessive may also include
proof that "the amount charged grossly exceeded the price at which the
same or similar goods or services were readily obtainable by other consumers in
the trade area." However, a merchant may counter with evidence that
additional costs not within its control were imposed for the goods or services.
Notably, the price-gouging law does not prohibit any disparity between the
price charged before and after there is an abnormal disruption of the market.
Rather, the statute prohibits a "gross disparity," when it is clear
that a business is taking unfair advantage of consumers by charging
unconscionably excessive prices, and increasing its profits, under severe
circumstances that call for shared sacrifices.

In addition to urging New Yorkers
to remain vigilant against potential price gouging as residents continue the
rebuilding process, Schneiderman also issued tips on how to avoid scams related
to home repair, clean up services and tree removal:

•Never pay cash, and don't pay the full price up front. Establish a
payment schedule and adhere to it. Withhold final payment until the entire
project is completed to your satisfaction and all required inspections and
certificates of occupancy are finalized.

•Check with your insurance company. Before making any decisions, be
clear about what will be covered and any steps you will need to take.

•Ask for references, check for licenses. Ask about local work
contractors have done. Talk to the people who hired them; look at the jobs if
you can. Make sure the contractor has any license required by your local
government.

•Estimates are important: Get it in writing. Ask that all
estimates for work be in writing and include a description of the material to
be used. Be clear that you will not pay for work done that is not agreed upon
in writing. Verify that the material used is the same as described in the
estimate. Make sure any changes to the estimate are in writing.

•Know your rights. Home improvement contractors are required by law
to establish to an escrow account to hold the homeowners' un-disbursed funds
when a contract is in excess of $500. Also, a homeowner has a three-day right
to cancel a contract unless during an emergency, the homeowner has waived the
three-day rule in writing.

•Use a contractor with an address you can verify. If your
contractor is "here today and gone tomorrow," you may find it difficult to
enforce the guarantee.

•Always be sure the contractor has valid insurance. If a worker is
injured, or damage is caused on your property, you could be held liable if your
contractor does not have the required insurance.

•Check with your town or city for required permits. Don't let a
contractor work without the necessary permits. Failing to get approvals can
delay your project, or prevent you from occupying a completed building.

If you believe you are a victim of
price gouging or a post-hurricane scam, contact the Attorney General's Consumer
Helpline at 800-771-7755 or find a complaint form online at: www.ag.ny.gov.